Gold Coast food franchisor Retail Food Group gobbles up new food company, posts record profit

IT had no appetite for fallen rival Eagle Boys but Retail Food Group has gobbled up another food company.

Andre Nell, CEO of Retail Food Group.

IT had no appetite for fallen rival Eagle Boys but Retail Food Group has gobbled up another food company.

Acquisition-hungry RFG beat off trade buyers and private equity players to buy Melbourne-based family food business Hudson Pacific.

Gold Coast-based RFG paid $88 million — $55 million cash and $33 million in RFG shares.

In July, the food franchisor said it was not interested in buying Eagle Boys but acquisitions were “a central feature” of its growth strategy.

It comes as newly-minted managing director Andre Nell, who took over from outgoing MD Tony Alford, presided over RFG posting a record FY16 net profit of $61.3 million, up 79.1 per cent.

The result for RFG, owner of the Donut King, Brumby’s Bakery and Gloria Jean’s Coffee brands, came off a 30.5 per cent rise in revenue to $274.6 million.

The result saw RFG shares surge 45¢, or 7.53 per cent, to $6.42.

Mr Nell said after integrating its Cafe2U, Di Bella Coffee and Gloria Jean’s Coffee groups, the company was ideally positioned for its next M&A opportunity.

He said RFG beat off the competition because of its long-term relationship with Hudson Pacific.

“We’ve known them for 20 years. Hudson has been a distribution partner to Donut King and we know the business very well,” he said.

Mr Nell said RFG is considering taking the business global, particularly to China, to take advantage of Australia’s growing food reputation in Asia.

He believes the Asian market will be attracted to Hudson’s cheese business.

“This acquisition provides a significant platform for growth and allows RFG to evolve into a full food service business,” he said.

“Hudson is a domestic business but ultimately we would like to grow it internationally.”

Hudson Pacific Corporation was founded by Ken Skoullos in Victoria in 1985 and has grown to become a major procurement, warehousing, manufacturing and distribution business offering more than 4000 products.

It also operates Dairy Cheese, Australia’s largest independent cheese enterprise, and Bakery Fresh, a manufacturer specialising in chilled/frozen bakery products.

Hudson produces its own cheese, biscuits, bread, pizzas and pizza bases and has worked with industry heavyweights including Coles, IGA Group and Aldi.

“The Hudson Pacific acquisition, which will be immediately EPS accretive, is unique in that it satisfies each of RFG’s core investment criteria,” Mr Nell said.

HPC founder Ken Skoullos and CEO Frank Karkalas have joined RFG to grow the business.

Mr Nell said in FY16, RFG grew its global business across Europe, the Middle East and Pacific, growing international territories to 69, further diversifying the group’s revenue streams.

He said its international, coffee and allied beverages operations had become significant earnings drivers and were key platforms for RFG’s future growth.

RFG is tipping underlying profit growth of around 20 per cent for fiscal 2017, with a contribution of about 8 per cent from the Hudson Pacific purchase.

It will pay a full year dividend of 27.5¢ a share, up 18.3 per cent.